Wanted to know seasoned investors opinion on this. There is an area where property can be bought for under $50k and in very good condition, many move-in ready but in one of the countries worst cities; Camden NJ. Thoughts???
Don't do it. At least not to begin your investing career with.
Invest in an area that you feel comfortable with. Stay away from high crime areas. High crime areas will only attract bad quality tenants.
I invest in Richmond, CA, what was once considered one of the most dangerous cities in the country per capita. I personally lived there for over a year at my investment property. And I own other rentals in lower-income, higher-crime areas. This street is way better than 90% of people think, 95% of which have never actually been to the city- only "heard."
In my opinion, you may make this work by finding the really good streets within those bad areas. And then you have to actively manage the properties to make sure things are staying in order, and the tenants aren't getting out of hand. I have the nicest place on the block, and it attracts the best people in the neighborhood. Given, they are not wealthy - But hard-working people saving to get ahead.
If you run the place like a slumlord - it will turn into the slums.. if you don't pay attention, things will get out of hand. If you buy on a bad street in the bad neighborhood, look out! But you can find a diamond in the rough if you're willing to go put in due diligence where others are not willing to spend their time.
My best advice on finding the good streets in these neighborhoods is walk the streets, tell people you're looking at the area, and ask everyone on the street: how is the street? the neighborhood? been there for a while? crazy spots nearby? getting better? worse? Look at citydata.com and local statistics. Great info here too. But can't beat the streets!
Not for the faint of heart, or don't want headaches, and maybe not for a newbie, but can it make great returns? Done properly, yes!
How comfortable are you with the area? A lot of bad areas have great pockets in them that can make great investments with AWESOME RETURNS!!! I would place sec 8 tenants in them to maximize your return!!
Bad, dont do it
@Barshay Graves ..I purchase SFR in metro Birmingham, but I'm selective on properties. I will not purchase any property my family and I can't live in. Most of my tenants are single families with children, so safety is a concern. These are working class tenants requiring affordable homes...
1. I look for the best street(avoid abandon/burnout houses)
2. I talk to neighbors(get history of home/area)
3. I find out location of school,church, library, public transportation
By providing a great property with LIFE in the community and affordable tenants refer friends
My experience is good, but you need to find what works best for you.Good luck!
I have a general rule of thumb. If I feel uncomfortable going to any of my properties at any time of day then it's probably best I don't keep my money parked there, since it's spending more time there then me. ;)
I don't have any experience with this, but you might want to get "The Section 8 Bible". It's all about how to succeed with Section 8 rentals in low-income areas. A lot of good info.
Also, you can do a search for it on this forum and read a lot of people's ideas that go along with the book.
Candidly, if you're looking to invest in cheaper properties, you are not limited to investing in high-crime areas. Many cities in the Midwest offer similar properties at a similar price point that generate gross rental revenue of $1,250/mo. Whether the property is in Camden, NJ or Ohio, I would imagine that you will spend little time at the property and have a PM firm in place.
Everything I know about Camden is from the Rolling Stone article "Apocalypse, New Jersey." After reading that, I wouldn't even drive through the city, let alone invest in it. http://www.rollingstone.com/culture/news/apocalypse-new-jersey-a-dispatch-from-americas-most-desperate-town-20131211
In Cleveland, I can go buy a $7.5K home in a borough like Hough. Or I can buy one home for $50-75K in a suburb that will attract good tenants, appreciate in value, will meet lender standards, etc. I prefer the latter.
Unless of course you want to invest in Camden because you think it will be over-run by hipsters in 10 years. I'm not one for speculation, though :-)
I am going to agree with most folks on here with an exception. There is a new medical school going in and there is great academic growth at Rutgers / Rowan. There may be an opportunity for someone who can find and market the right property to students. Would I invest there, no, not when there are other areas at the 50k price point that I feel offer a better value as a matter of fact Vineland / Millville can be one of those great value areas.
I try to avoid investing in the worst city in the county. Not opposed to low income areas but dont want to be invested in the bottom.
I invest in Trenton(but only certain parts), but I would not invest in Camden. I Dont know the market. Seems Philly would be better for that area. Philly price maybe higher but taxes are cheap.
That said My Mtg guy has 2 rentals in Camden that he rents section 8 and he is fine with it. he rented to some that were not section 8 and they trashed the place and now only rents to section 8.
Not knowing that market. I think 50k is high. I can find sub 30k 3br in Trenton that rent for $850+
I think the NJ market is very hard for someone looking for lower priced property. Your choices are War Zones or 250k and up homes. (there are some working class 100k homes but you gotta be a ninja :) )
I really didn't want to invest in Trenton, but when i run the numbers I am getting good cash on cash returns even if I miss 3-4 months of rent (vac and evictions). The down side is that you get no appreciation and just more work.
My 2 cents
It all depends if you know the market. I am not fro Camden but I got two degrees from Rutgers in Camden so I know the area. The cash flow is high but if you do not know the area there are other areas that may be safer but still have high yields.
You might look into Lindenwold, Clemton, or Pennsauken.
It's very lucrative when its' done right, but if you get stuck with it, it's an ugly way to make a few bucks in the long term. The character of your clientele and economics of that business model will demand a hard nosed nickel & dime disposition throughout. Cost of arms' length management comes at a fee rather than a percentage, so we're talking 20% or thereabouts.
This is a portfolio that could also be very tough to exit unless you have all your cash out in 12 years or less..
@jonlafferty Well I live in Vineland looks like I need to research my back yard more
@DerrickCraig I'm comfortable but do have some reservations, I may be thinking about cash more than other factors...
@Leslie A. I have the book just haven't cracked it yet; shame on me...
Great topic. I have thought about doing this and then hiring a property manager so I don't have to deal with the problems personally. You can buy properties so cheap and with section 8 rent pay them off in just a few years.
I have never heard of the area you mentioned but can comfortable say that there are many other locations nationwide where you can purchase properties for under $50,000 in very desirable and solid B class areas.
Thanks and have a great day.
If *you* are not comfortable in the area then don't invest in the area. Everyone has different opinions of what a bad/good areas are. I have a house in an area where anytime I tell someone I own in that area they're like "that's a bad area" but the house is on the same street I grew up on so I'm comfortable in the area. Easy money for me.
Don't do it if your not comfortable with the area. Plain and simple. Look for the next deal in a better area you are comfortable with.
@Barshay Graves I am focusing primarily on low income areas. These areas offer the best cash on cash return, and they offer a way for those of us who aren't already wealthy, to begin our investment careers.
I used to be very much low income. However, that didn't mean I was garbage, or that I would tear up my rental, or not pay. No, it only meant that I earned less money than the average. I have always hated the stereotypes, and having actually lived on the other side, I think differently than many who have never been there.
I have seen this sort of backwards thinking by certain people my whole life. They look down on the lower income and assume that they are all garbage, criminals, and idiots. I vowed when I got into real estate investing that I wouldn't be one of these people, and that I would never be a "slum lord". My apartments are lower cost, but they are not slums.
At the same time, it is completely unrealistic to suggest to a new investor without much income that they focus on higher end rentals. Perhaps eventually they will be able to go that route, but when getting started, it would be difficult.
I started out as a newbie investing in low income properties and live to tell about it. It does have a lower barrier to entry and it does have nice cash flow.
Two things to point out, though:
First, people with a section 8 voucher are often looking for a step nicer than what I consider truly low income high crime areas, since their rent is subsidized and they can afford a better neighborhood. Figure out your true target market.
Second, it would be difficult to do far from home. Property managers hate the lower end rentals, so even if you use them as a buffer you will be impacted by the revolving door and drama prevalent in the lower income neighborhoods.
@Zoran M. Id appreciate if you didnt let the cat out the bag about the midwest, its my breeding ground...LOL
@Barshay Graves Whenever this topic gets brought up it all stirs up debate. And to be honest its all about you and where you feel comfortable. And the fact of the matter your money may only let you invest in those types of area...My personal opion is GO FOR IT...But just use your brain, and calculate numbers, plan ahead, find the right PM company ahead of time...lock down your contractors, tighten up the budget. And jump in..There are good hardworking and honest people in every city in this world. You just have to find those people. It all about tenant placement. Almost all my rentals are in lower income neighborhoods, but tenannt placement is #1 for me. I have wonderful tenants that pay on time, they take care of my properties. To put it all in perspective , one of my buyers in my wholesaling business. Owns over 4k rental properties primarilly in the midwest. Majority of them are in the badder parts of town but he perfected tenat placement. The reality of it is tenants in any kind of neighborhood can make your life a living hell. It just has to be for you, i grew up in the rougher area of Southern...so i get it, i understand where they come from, and why they do the things they do, so it dosent scare..I sa dont let anyone discourage you there are some investors on here who make a killing in those areas...Just my 2cents.
hi. I'm no guru. Nor could I give u advice on the good or bad side of investing in the "hood", but speaking as someone who grew up in whats considered a rough part of philly, these neighborhoods could use someone like u. my neighborhood was rough but, some of the best ppl in the world lived on my street. As a matter of fact, I grew up with the male singer from Kindred and the Family Soul.
A lot of narrow minded individuals would tell u not to invest in these areas, but that's exactly what they need. Trust me...none of these ppl want to live in ghettos. Their part of town has just been economically neglected. Ur presence may create jobs for the poor who otherwise engage in crime to survive. Seek out qualified individuals in the area who may need work. Hire them to do cleanouts and such. These ppl need jobs and better living conditions, not ppl looking down their nose at them.
Don't foolish. By all means, hire security to ensure the property isn't broken into while renovating. But investing in these low income communities will spur their growth. good luck to u.
Just my humble opinion.
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